OZ Minerals
has frozen pay for most staff and slashed bonuses as it attempts to maintain profitability in the face of lower copper and gold prices and a pit wall slip at its Prominent Hill mine.

It has also raised the prospect of seeking a joint venture partner on its $2.5 billion Carrapateena copper-gold project, although it does not expect to make a decision until it completes feasibility studies in 2015.

OZ shares closed 11 per cent lower at $4.30 on Monday – the lowest in a decade – after it cut its production guidance by around 8 per cent and raised its cash cost forecasts due to the pit wall slippage, lower gold by-product credits and a higher Australian dollar.

It has raised its full-year, cash-cost estimate to $US1.65 to $US1.80 a pound from previous guidance of $US1.50 to $US1.65 a pound. Every $US100 an ounce fall in the gold price from OZ’s forecast of $US1550 an ounce will raise costs by another US5¢ a pound.

Including royalties and depreciation, OZ reported total costs of $US3.23 per pound of copper in the March quarter. That compares to the spot copper price of $US3.13 a pound and indicates OZ is making a bottom-line loss at current prices but has positive cashflows.

OZ managing director
Terry Burgess
said the miner had been renegotiating contracts with suppliers as a result of a downturn in the market and BHP Billiton’s decision to shelve a $US20 billion expansion of the nearby Olympic Dam mine. It has also put in place a pay freeze for all but the lowest paid employees and cut bonuses in half.

“No one got a pay increase at the beginning of the year," Mr Burgess said, noting in boom times it had sometimes had to raise pay every six months to retain workers. The miner’s annual report released on Monday showed Mr Burgess earned $1.63 million in 2012, down from $1.88 million in 2011.

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OZ disclosed the pit wall failure had occurred in mid-February and it would cost $15 to $20 million to clear the overburden. Analysts criticised the company for not disclosing the event when it occurred given it only has one operating mine. “That removes a bit of market confidence when these things aren’t spoken about when they happen," Bell Potter analyst Stuart Howe told Mr Burgess on an investor call.

Mr Burgess said the miner had previously disclosed geotechnical issues with the south wall of the pit, including an incident in November mentioned in the December quarter report.

However, UBS analyst Jo Battershill said he was nevertheless surprised it was not announced when it occurred.

“To see another slip within that pit after pushing it back makes me wonder whether the initial engineering studies were adequate," he said.

The OZ pit wall slip involved up to 3 million bank cubic metres (bcm) of overburden material, which compares to the 150 million tonnes Rio Tinto will need to move at its Bingham Canyon mine in Utah following a spectacular incident earlier this month. OZ expects to clear the overburden by August.

Mr Burgess said OZ remained focused on its Carrapateena growth project where it is studying a block cave as one option to produce 100,000 tonnes of copper and 100,000 ounces of gold a year. He said OZ would not decide until 2015 whether to develop the mine itself or with a financial or technical partner. OZ also stays open to acquisitions. Mr Burgess wouldn’t comment on whether it is interested in Rio’s Northparkes mine in NSW, which is worth about $US800 million.